Diageo has shed almost 2,000 employees over the past year as new chief executive Sir Dave Lewis pushes ahead with a sweeping cost-cutting programme at the Guinness and Johnnie Walker maker.

The drinks giant’s average full-time workforce fell more than six per cent to 27,938 in the year to 30 June, down from 29,860 a year earlier, according to its latest annual report.

The reduction comes as former Tesco boss Lewis, who took the helm at Diageo in January, begins a major overhaul designed to reverse declining profits and make the business more competitive.

Despite the fall in headcount, Diageo’s average staff costs increased from $2.48bn to $2.55bn during the year, with higher UK employer National Insurance costs among the pressures facing the business.

Lewis has set out plans to generate around $1bn in savings, with the company restructuring its operating model and supply chain while stripping out duplication across the business. Diageo said its new operating framework alone is expected to deliver approximately $850m of savings over two years.

Further job losses are expected as the programme progresses, with analysts estimating the restructuring could ultimately result in between 3,000 and 5,000 roles being cut. Most reductions across Diageo’s regional markets are expected to be completed by early September.

The overhaul comes against a challenging backdrop for the global alcohol sector as consumers rein in spending and drinking habits change.

Diageo’s net sales fell three per cent on a reported basis to $19.6bn in its latest financial year, while organic sales declined two per cent. Reported operating profit tumbled 27.2 per cent to $3.16bn, reflecting restructuring costs and impairment charges.

The group booked $900m of restructuring charges during the year, alongside $1.5bn of impairment charges, largely linked to its Turkish business.

Lewis is looking to use the savings to reinvest behind Diageo’s brands and restore growth, with a renewed focus on more accessible names including Smirnoff and Captain Morgan alongside booming Guinness and faster-growing ready-to-drink products such as canned cocktails.

The strategy marks a shift after years in which the drinks giant prioritised premiumisation, with persistent inflation and pressure on household budgets encouraging shoppers to become more cautious about spending on higher-priced alcohol.

Diageo said organic operating profit increased two per cent before exceptional items despite the sales decline, while free cash flow rose by $463m to $3.2bn.

Lewis said the business was rolling out “significant” changes across Diageo, with the savings intended to provide funds to invest in its turnaround without reducing underlying operating profit.

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